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Mark schemes are prepared by the Principal Examiner and considered, together with the relevant questions, by a panel of subject teachers. This mark scheme includes any amendments made at the standardisation events which all examiners participate in and is the scheme which was used by them in this examination. The standardisation process ensures that the mark scheme covers the students responses to questions and that every examiner understands and applies it in the same correct way. As preparation for standardisation each examiner analyses a number of students scripts: alternative answers not already covered by the mark scheme are discussed and legislated for. If, after the standardisation process, examiners encounter unusual answers which have not been raised they are required to refer these to the Principal Examiner. It must be stressed that a mark scheme is a working document, in many cases further developed and expanded on the basis of students reactions to a particular paper. Assumptions about future mark schemes on the basis of one years document should be avoided; whilst the guiding principles of assessment remain constant, details will change, depending on the content of a particular examination paper.

Further copies of this Mark Scheme are available from: aqa.org.uk Copyright 2012 AQA and its licensors. All rights reserved. Copyright AQA retains the copyright on all its publications. However, registered centres for AQA are permitted to copy material from this booklet for their own internal use, with the following important exception: AQA cannot give permission to centres to photocopy any material that is acknowledged to a third party even for internal use within the centre. Set and published by the Assessment and Qualifications Alliance. The Assessment and Qualifications Alliance (AQA) is a company limited by guarantee registered in England and Wales (company number 3644723) and a registered charity (registered charity number 1073334). Registered address: AQA, Devas Street, Manchester M15 6EX.

Mark Scheme General Certificate of Education (A-level) Accounting ACCN4 January 2012

3

January 2012 ACCN4

MARK SCHEME

INSTRUCTIONS TO EXAMINERS You should remember that your marking standards should reflect the levels of performance of students, mainly 17 years old, writing under examination conditions. Positive Marking You should be positive in your marking, giving credit for what is there rather than being too conscious of what is not. Do not deduct marks for irrelevant or incorrect answers as students penalise themselves in terms of the time they have spent. Mark Range You should use the whole mark range available in the mark scheme. Where the students response to a question is such that the mark scheme permits full marks to be awarded, full marks must be given. A perfect answer is not required. Conversely, if the students answer does not deserve credit, then no marks should be given. Alternative Answers/Layout The answers given in the mark scheme are not exhaustive and other answers may be valid. If this occurs, examiners should refer to their Team Leader for guidance. Similarly, students may set out their accounts in either a vertical or horizontal format. Both methods are acceptable. Own Figure Rule In cases where students are required to make calculations, arithmetic errors can be made so that the final or intermediate stages are incorrect. To avoid a student being penalised repeatedly for an initial error, students can be awarded marks where they have used the correct method with their own (incorrect) figures. Examiners are asked to annotate a script with OF where marks have been allocated on this basis. OF always makes the assumption that there are no extraneous items. Similarly, OF marks can be awarded where students make correct conclusions or inferences from their incorrect calculations.

Mark Scheme General Certificate of Education (A-level) Accounting ACCN4 January 2012

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Assessment Objectives (AOs) The Assessment Objectives are common to AS and A Level. The assessment units will assess the following Assessment Objectives in the context of the content and skills set out in Section 3 (Subject Content) of the specification. AO1: Knowledge and Understanding

Demonstrate knowledge and understanding of accounting principles, concepts and techniques.

AO2: Application

Select and apply knowledge and understanding of accounting principles, concepts and techniques to familiar and unfamiliar situations.

AO3: Analysis and Evaluation

Order, interpret and analyse accounting information in an appropriate format. Evaluate accounting information, taking into consideration internal and external factors to make reasoned judgements, decisions and recommendations, and assess alternative courses of action using an appropriate form and style of writing.

Quality of Written Communication (QWC)

In GCE specifications which require students to produce written material in English, students must: ensure that text is legible and that spelling,

punctuation and grammar are accurate so that meaning is clear

select and use a form and style of writing appropriate to purpose and to complex subject matter

organise information clearly and coherently, using specialist vocabulary when appropriate.

In this specification, QWC will be assessed in all units. On each paper, two of the marks for prose answers will be allocated to quality of written communication, and two of the marks for numerical answers will be allocated to quality of presentation. The sub questions concerned will be identified on the question papers.

Mark Scheme General Certificate of Education (A-level) Accounting ACCN4 January 2012

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Task 1 Total for this task: 8 marks

(2 100 + 1 500)/600 = 6 (1) marginal cost 2 400/600 = 4 (1) fixed cost per unit Full cost = 10 (1) OF Selling price 10 x 1.2 = 12 (1) OF 4 marks

Break even is: (i) 2 400 (1)/(12 6) (1) OF = 400 (1) OF scarves (ii) 400 x 12 = 4 800 (1) OF revenue

4 marks

02 Using the selling price you calculated in 0 1, calculate the: (i) number of scarves that Keisa needs to make to break even (ii) revenue at the break-even point. (4 marks)

01 Calculate the selling price per scarf. (4 marks)

Mark Scheme General Certificate of Education (A-level) Accounting ACCN4 January 2012

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Task 2 Total for this task: 30 marks

Manufacturing account for Locksum Ltd for the year ended 31 October 2011

Opening inventories of raw materials 12 000

Purchases of raw materials 64 500

Carriage inwards 6 100*

70 600

Closing inventories (stock) of raw materials (16 000)

Cost of raw materials consumed 66 600 (1) OF

Royalties 7 000 (1)

Direct wages W1 16 830 (2) OF

Prime cost 90 430 (1) OF

Indirect wages W1 39 270 (1) OF

Factory overheads 24 200*

Insurance W2 9 900 (1)

Machinery depreciation 60 000 (1)

Rent W3 11 800 (2) OF

145 170

235 600

Opening work in progress 6 400

Closing work in progress 4 200

2 200 (1)

Cost of manufacture 237 800 (1) OF *(1) for both carriage inwards and factory overheads. W1 Wages (84 300 + 9 200) x 60% = 56 100 (1) 56 100 x 30% = 16 830 (1) OF direct 56 100 x 70% = 39 270 (1) OF indirect

03 Prepare the manufacturing account for Locksum Ltd for the year ended 31 October 2011. (14 marks)

(this includes 1 mark for quality of presentation)

Mark Scheme General Certificate of Education (A-level) Accounting ACCN4 January 2012

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W2 Insurance 13 200 x 75% = 9 900 (1) W3 Rent (18 900 1 200 (1)) x 2/3 = 11 800 (1) OF 13 marks Plus 1 mark for quality of presentation

Total: 14 marks

To: From: Date Subject The current cost per lock is 237 800/400 000 = 59.45p per lock (1) OF. If the relocation takes place then the cost per lock is reduced by 19.45p (1) OF each. This is a total saving on current production levels of 77 800 per year (1) OF (ie 237 800 less 160 000). It would take approximately 19 years (1) OF to cover the initial costs of the relocation (1). Shareholders will be happy in the long run as dividend per share could rise with this saving (1). However, there is a financial cost of relocation in the short run (1). How will this be financed in the short run? (1) If the money has to be borrowed, what is the interest payable (1), which will reduce profits before dividends (1), or is another issue of shares required? (1) which will reduce the earnings per share (1). Any cost of training in Eastern Europe or increased distribution costs? (1) What is the cost of returns if quality is not maintained? (1) Cost of redundancies (1) cost of transport (1) will reduce profits. There may be an effect on the reputation of the business if they relocate? (1), especially if there are considerable redundancies and the factory is not sold as a going concern (1). This may reduce the market value of the shares (1). Can the quality of the locks be assured (1) or the quality of the workforce? (1) Possibility of transport delay/reliability (1) language barriers (1) eastern European legislation (1).

Overall maximum for financial and non-financial factors: 12 marks Recommendation Clear recommendation (1) with justification (1). Max 2 marks for recommendation

Overall Max 14 marks Quality of written communication (QWC) awarded for well structured prose responses and accurate spelling punctuation and grammar: for 2 marks: The student must have no more than 3 spelling, punctuation or grammar

errors and have provided suitable report headings (to, from, date and subject) for 1 mark: The student will have 4 or more spelling, punctuation or grammar errors, but

the meaning is clear and some attempt at using report headings for 0 marks: The student response is limited and/or difficult to understand a repeated spelling punctuation or grammar error only counts as one mistake. 2 marks

Total: 16 marks

04 Write a report to the directors of Locksum Ltd recommending whether or not the manufacturing process should be moved to eastern Europe. Consider both the financial effects and the non-financial effects from the viewpoint of the shareholders. (16 marks)

(this includes 2 marks for quality of written communication)

Mark Scheme General Certificate of Education (A-level) Accounting ACCN4 January 2012

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Task 3 Total for this task: 31 marks

Year Net cash flow Discount factor

Present value

0 (300 000)

W1

1 (300 000.00) (1)

1 90 000 0.926 83 340.00 (1) OF

2 116 400 0.857 99 754.80 (1) OF

3 147 080 0.794 116 781.52 (1) OF

Net present value (123.68) (1) OF Variable costs (0.25 x 16) + (0.5 x 28) = 18 (2) CF Contribution 40 18 = 22 (1) CF W1 Net cash flows Year 1 (6 000 (1) x 22) = 132 000 (2 000) (1) = 130 000 40 000* = 90 000 (1) OF Year 2 (7 200 (1) x 22) = 158 400 (2 000) (1) = 156 400 40 000* = 116 400 (1) OF Year 3 (8 640 (1) x 22) = 190 080 (3 000) (1) = 187 080 40 000*= 147 080 (1) OF *1 mark for deducting fixed costs 40 000 in each calculation

18 marks

(i) Material price variance 2 600 (16 12) = 10 400 (1) favourable (1) (ii) Material usage variance 16 (2 600 1 550) = 16 800 (1) adverse (1) (iii) Labour rate variance 3 000 (28 20) = 24 000 (1) favourable (1) (iv) Labour efficiency variance 28 (3 100 3 000) = 2 800 (1) favourable (1) 8 marks

06 Calculate the following sub-variances: (i) direct material price variance(ii) direct material usage variance (iii) direct labour rate variance (iv) direct labour efficiency variance. (8 marks)

05 Calculate the net present value of the new machine. (18 marks)

Mark Scheme General Certificate of Education (A-level) Accounting ACCN4 January 2012

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(i) The variance arose because the staff were more highly motivated (1) due to improved

management and better working conditions (1). Productivity improvements due to training and development of the workforce (1).

This may be because of better machinery so the workforce could be more efficient (1).

(ii) The labour efficiency variance will increase profit (1) OF.

5 marks

07 Explain: (i) two possible reasons for the labour efficiency variance (ii) the effect of the labour efficiency variance on the budgeted profit for the first

year. (5 marks)

Mark Scheme General Certificate of Education (A-level) Accounting ACCN4 January 2012

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Task 4 Total for this task: 21 marks

Leather Sports Flak

Selling price 114 98 72 Variable cost 54 48 30 Contribution 60 (1) 50 (1) 42 (1) Labour hours 1.5 2 1 Contribution per labour hour 40 (1) OF 25 (1) OF 42 (1) OF

6 marks

Optimum production plan Max production of Flak first, then Leather and then Sports.

Units Hours

Flak 9 000 (2) 9 000

Leather 16 000 (2) 24 000 4 marks

There is no production of the Sports style of jacket (1) OF and demand for the Leather style is not fully satisfied (1) OF. Customers may therefore be lost to competitors (1) and market share may be reduced (1). The Sports style may be unique to Calvin Clobber Ltd (1). The demand for the other styles may depend on the purchase of the Sports style (1) so they may lose customers (1). Tastes may change (1) so demand changes. All information is estimated (1) so may be inaccurate.

Max 4 marks

10 Explain briefly the limitations of the production plan calculated in 0 9. (4 marks)

09 Calculate the optimum production plan which Calvin Clobber Ltd could introduce that, given the limited number of labour hours available, would maximise profit.

(4 marks)

08 Calculate the contribution per labour hour for each jacket. (6 marks)

Mark Scheme General Certificate of Education (A-level) Accounting ACCN4 January 2012

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Extract from Labour budget for periods 1013 for Calvin Clobber Ltd QWC 1 for the three elements

Period 10 11 12 13

Staff W1 15 15 15 15 (1) OF row

Hours (1) (40 x 4 x 15) 2 400 3 000 3 000 3 000 (1) OF (50 x 4 x 15) Workings W1 Hours per year per employee 40 x 4 x 10 periods (1) + 50 x 4 x 3 periods (1) = 2 200 (1) OF ie 1 600 (1) + 600 (1) = 2 200 (1) OF Maximum number of employee with hours available 33 000/2 200 = 15

6 marks Quality of presentation 1 mark for layout of budget showing number of staff, periods of time and total hours. 1 mark

Total 7 marks

11 Prepare an extract from the labour budget for each of the periods 1013, showing the maximum number of employees and the total hours worked per period.(7 marks)

(this includes 1 mark for quality of presentation)